Financial sector: "We're not the villains of the financial crises"

Ricochet J · 17 Sep 2010 at 09:46

I often read news articles on the financial sector of the UK. I came across an article today which said something, and had me thinking:

The Independent said:
Sources close to JP Morgan, which employs Tony Blair, the former prime minister, as an adviser, admit that the delay is largely down to senior officials being furious at the UK Government's portrayal of the financial sector as the villain of the recession.

Full article here: http://www.independent.co.uk/news/b...-in-potential-snub-to-government-2081570.html

JP Morgan's stance is understandable - they were a healthy bank with no bad debt. However (I feel) it's a growing trend that we're reading these sorts of statements in financial articles coming from a variety of financial institutions. I read a similar statement from Lehman Brothers about a year ago - they went as far as saying they were victims.

Now that the full scale of the financial crises has been unravelled, who's the villain?

Dolph · 17 Sep 2010 at 09:50

There are lots of villians, certainly where the UK is concerned.

Some banks did stupid things
Brown destroyed a regulatory system that worked for 300 years and replaced it with one that failed in less than 15
Accounting regulations broke the CRA market to the point where it no longer provided any functional protection and yet it's use was mandatory.
High levels of Regulation created moral hazard and implicit protection, compounded by the fact that the regulations were ineffective and counter-productive.
People kept borrowing money they couldn't afford
New Labour encouraged a housing boom and took specific steps to prevent the BoE doing anything about it.
New Labour doubled the national debt during their time in power, with over half the increase happening in the Boom, not in the bust.

Those are just the starters, but some banks are villainous, the Labour government was most definitely villainous, and we, the people, as a collective, were villainous.

scorza · 17 Sep 2010 at 10:03

I guess this is the start of a spin offensive from the banks, I heard JP Morgan have an employee who knows a thing or two about that. We've already had the attempt at blackmailing the government - do what we want or else we leave the UK. Only problem was that a lot of people thought the banks leaving the UK would actually be a good thing for our country.

Roubini · 18 Sep 2010 at 11:32

Dolph said:
There are lots of villians, certainly where the UK is concerned.

Some banks did stupid things
Brown destroyed a regulatory system that worked for 300 years and replaced it with one that failed in less than 15
Accounting regulations broke the CRA market to the point where it no longer provided any functional protection and yet it's use was mandatory.
High levels of Regulation created moral hazard and implicit protection, compounded by the fact that the regulations were ineffective and counter-productive.
People kept borrowing money they couldn't afford
New Labour encouraged a housing boom and took specific steps to prevent the BoE doing anything about it.
New Labour doubled the national debt during their time in power, with over half the increase happening in the Boom, not in the bust.

Those are just the starters, but some banks are villainous, the Labour government was most definitely villainous, and we, the people, as a collective, were villainous.

This is essentially correct, and you can probably just end the thread now.

The point about the failure of regulation, faulty risk measures and moral hazard is a particularly good one - and judging by the response to the crisis so far, is a lesson that has yet to be learned.

Vampyre · 18 Sep 2010 at 11:39

Roubini said:
This is essentially correct, and you can probably just end the thread now.

The point about the failure of regulation, faulty risk measures and moral hazard is a particularly good one - and judging by the response to the crisis so far, is a lesson that has yet to be learned.

Have to say I agree, I'm always amazed at how far people will go to blame someone else. I'm also shocked that people are now complaining because the banks aren't lending money hand over fist like they did, and yet are still prepared to wholly blame the banking system, you can't have it both ways.

Slam62 · 18 Sep 2010 at 11:40

the only thing I would add is that the financial crisis has not yet fully unravelled, there is a long way to go yet.

the coalition will not sort the debt at all and will tinker with the deficit.
http://www.telegraph.co.uk/finance/comment/jeffrandall/8007556/The-Coalition-is-spending-even-more-than-tax-and-waste-Labour.html

the banks have an awful lot more refinancing to do and individuals haven't scratched the surface of their debts.

oh and also the actual cuts haven't happened yet.

as to the blame, the blame is on the greedy.

Dolph · 18 Sep 2010 at 12:15

pirate said:
This is very interesting. What's percentage of people under poverty line in the UK? In the US it's about 15%.

http://www.bbc.co.uk/news/business-11324047

It very much depends how you define the poverty line. Define it against income and quite a few, define it against life needs, very few.

Dolph · 18 Sep 2010 at 12:16

Slam62 said:
the only thing I would add is that the financial crisis has not yet fully unravelled, there is a long way to go yet.

the coalition will not sort the debt at all and will tinker with the deficit.
http://www.telegraph.co.uk/finance/comment/jeffrandall/8007556/The-Coalition-is-spending-even-more-than-tax-and-waste-Labour.html

You can't sort the debt until you've sorted the deficit, given that the deficit is how much you are adding to the debt each year...

The only way the coalition could sort the debt faster would be to get rid of the deficit faster, which isn't practical even for the most ideological economic masochist.

Spending in real terms is still rising under the coalition, just nowhere near as much as it was planned to by Labour.

dowie · 18 Sep 2010 at 12:49

Dolph said:
There are lots of villians, certainly where the UK is concerned.

Some banks did stupid things
Brown destroyed a regulatory system that worked for 300 years and replaced it with one that failed in less than 15
Accounting regulations broke the CRA market to the point where it no longer provided any functional protection and yet it's use was mandatory.
High levels of Regulation created moral hazard and implicit protection, compounded by the fact that the regulations were ineffective and counter-productive.
People kept borrowing money they couldn't afford
New Labour encouraged a housing boom and took specific steps to prevent the BoE doing anything about it.
New Labour doubled the national debt during their time in power, with over half the increase happening in the Boom, not in the bust.

Those are just the starters, but some banks are villainous, the Labour government was most definitely villainous, and we, the people, as a collective, were villainous.

Although I'm not a big fan of 'New Labour' we'd have been screwed regardless of who was in power - the regulatory environment in the UK and our housing market might have had some effect but the main source of the problem was down to the US sub prime crisis and the financial products that had been packaged and sold on.

A large portion of responsibility goes to a small number of quants working in credit at various banks. Also the US govt for forcing the banks to make more loans available to ethnic minorities etc.. and as a result kicking off the sub prime fiasco. In the end too, collectively, all the people who borrowed more than they could afford are also to blame.

So basically the blame lies with:

A handful of mathematicians, the US govt and a whole bunch of low income/unemployed red necks and african americans who took out mortgages they could never hope to pay back.

Slam62 · 18 Sep 2010 at 13:10

Dolph said:
You can't sort the debt until you've sorted the deficit, given that the deficit is how much you are adding to the debt each year...

The only way the coalition could sort the debt faster would be to get rid of the deficit faster, which isn't practical even for the most ideological economic masochist.

Spending in real terms is still rising under the coalition, just nowhere near as much as it was planned to by Labour.

Yes well that may not be enough or may be too much. What ever happens it is flakey as hell.

http://www.telegraph.co.uk/news/newstopics/politics/nick-clegg/8010384/Nick-Clegg-The-Lib-Dems-have-no-future-on-the-left.html

looks like Cleggy weggy is going for a permanent merger with the toffs.

Politicians eh gotta love em. :rolleyes:

actually wouldn't surprise me if a few of them have already done a deal.

All of which will lead to so much disgust that new new labour will win the next election and spend, spend, spend.

Beansprout · 18 Sep 2010 at 13:12

I remember reading an article way back in 2004-ish which talked about the dangers of people self-certifying income on mortgage applications....wish I could find it but it was in a sunday paper / magazine which is long gone.

Von Smallhausen · 18 Sep 2010 at 14:42

A lot of the criticism levelled at the Deputy PM is very unfair.

He was never going to win the election with the current system of voting.

He was never going to prop up Labour in any coalition as he couldn't stand Brown although Brown did say he would resign. It was also not possible mathematically for Lib Dems and others to form a coalition.

The Tories fell short by 19 votes and could have pressed on with a weak government where no legislation could get passed and another election was likely within a year, Cameron, to his credit, offered the Lib Dems a chance to form a government.

Instead of bickering, two parties got together and thrashed out a deal where policies of their own were introduced and that occasion so rare in politics came about. They worked together.

I am not naive enough to think there is no heated words behind closed doors and not everyone likes the current arrangement but although deep cuts are troubling, I am still liking the current arrangement and the rapport between Cameron and Clegg is not one for show I feel.

As for Labour getting back in at the next election, I have my doubts.

Slam62 · 18 Sep 2010 at 17:22

Von Smallhausen said:
A lot of the criticism levelled at the Deputy PM is very unfair.

As for Labour getting back in at the next election, I have my doubts.

Well as a lib dem voter I regret it. I used to think my MP Steve Webb was ok but now I just think he's grabbed power.

maybe the tories will get a majority next time, but I don't think the lib dems will.

It's all fine by me because now we know where they stand, what bug's me is my perception that I've been tricked, that may have been because I was too naive though.

I think we should have had a minority govt with the issues decided as they were addressed. But that doesn't matter.

At the end of the day the lib dems lost votes and lost seats so they should not have a say on anything. Having been in favour of PR maybe this has shown me that PR would be a bad thing. On reflection, a govt that does one thing or the other maybe better than the current one that is trying to do everything.
I do think that under this govt we will end up with the worst of all worlds. (before anyone leaps in no I don't think the current labour party would do any better). I do think all politicians and the political system have completely lost touch with the real world.

As for labour getting in, who knows really, but there will be a lot of disruption in the next few years.

Dolph · 18 Sep 2010 at 17:25

Slam62 said:
Yes well that may not be enough or may be too much. What ever happens it is flakey as hell.

http://www.telegraph.co.uk/news/newstopics/politics/nick-clegg/8010384/Nick-Clegg-The-Lib-Dems-have-no-future-on-the-left.html

looks like Cleggy weggy is going for a permanent merger with the toffs.

Politicians eh gotta love em.

The failure here is not the politicians, it's those who failed to understand what the lib dems, especially under clegg, represent. It hasn't been hidden, they published it all within the Orange book, they are a classically liberal party with a social democratic fringe, not the other way around as they were under Kennedy.

The final acknowledgement of this enables me to consider voting lib dem again in the future

actually wouldn't surprise me if a few of them have already done a deal.

All of which will lead to so much disgust that new new labour will win the next election and spend, spend, spend.

The next election won't be until 2015, and if Labour vote in Ed Milliband, they are very unlikely to win it, as any lurch to the left will ensure that.

Xordium · 18 Sep 2010 at 18:42

Dolph said:
It very much depends how you define the poverty line. Define it against income and quite a few, define it against life needs, very few.

Totally agree with this and your earlier post. One of the biggest problems is that people seem to be completely unable to distinguish between the words "want" and "need".

Slam62 · 18 Sep 2010 at 19:35

Dolph said:
The failure here is not the politicians, it's those who failed to understand what the lib dems, especially under clegg,

well yes in a nutshell, as I said all is clear now.

Dolph said:
The next election won't be until 2015, and if Labour vote in Ed Milliband, they are very unlikely to win it, as any lurch to the left will ensure that.

I wouldn't bet on it, a lurch to the left may prove very popular as long as it is presented correctly. Interesting times though, 20th October is it? that is the real beginning.

My prediction (probably wrong I'll grant you) is 4m unemployed and a deficit of 200bn come 2015.

If unemployment is 1m and the deficit 0, I will be very pleased (if I still have a job)

Dolph · 18 Sep 2010 at 19:38

Slam62 said:
well yes in a nutshell, as I said all is clear now.

I wouldn't bet on it, a lurch to the left may prove very popular as long as it is presented correctly. Interesting times though, 20th October is it? that is the real beginning.

Historically lurching to the left has never been popular. Staying centre when the government is percieved to move to the right is, but actual left wing politics is popular with labour party members and the unions but horrifically unpopular with everyone else.

My prediction (probably wrong I'll grant you) is 4m unemployed and a deficit of 200bn come 2015.

If unemployment is 1m and the deficit 0, I will be very pleased (if I still have a job)

It will largely depend on how you define unemployed... Labour presided over an increase in worklessness, but a decrease in unemployment, and a massive increase in part time workers and net state claimants.

Slam62 · 18 Sep 2010 at 19:48

Dolph said:
Historically lurching to the left has never been popular. Staying centre when the government is percieved to move to the right is, but actual left wing politics is popular with labour party members and the unions but horrifically unpopular with everyone else.

It will largely depend on how you define unemployed... Labour presided over an increase in worklessness, but a decrease in unemployment....

well I remember both Michael Foot and Neil Kinnock trying to get elected (I was at voting age for the latter). Kinnock is pretty left wing and very nearly got elected. He was not exactly media friendly either. A lot of it will depend on how evil the coalition is perceived to be and how obviously loony left labour become.

drunkenmaster · 18 Sep 2010 at 19:52

maustin said:
Totally agree with this and your earlier post. One of the biggest problems is that people seem to be completely unable to distinguish between the words "want" and "need".

Actually the biggest problem is that you misunderstand why people mean want when they refer to poverty.

Here's a hint, society is based on wants, banking is based on wants, jobs are based on wants, the financial sector is based on wants, our entire society is based on wants, the world economy is based on wants, capitalism is based on wants.

Our society completely fails when people start only buying what they need rather than what they want. Basically if everyone today stopped buying everything but food and basic clothing, the whole world economy would grind to a halt and we'd be plunged into a crisis.

Every single job, every, pretty much everything in our lives is based on buying things we want, spending money, and then spending more money our whole lives, without "want" over need, everything would collapse.

Thats why we poverty is defined by the level at which people can operate and get the basics of what people WANT, rather than NEED and why its so crucial we have a society with very few people below that threshold, because we need the vast majority to keep spending money on new tv's, and new cars, and new clothes they don't need, and etc, etc, because if they didn't, we're all completely screwed.

As for who the villians are in the financial crisis, Labour.

Theophany · 18 Sep 2010 at 19:57

Gotta love every man and his missus saying the bankers are evil. Remind me who voted in the government that allowed all of it to go to pot? 'Iron Chancellor' my aunt fannie - a man with a history degree and a severe disposition toward distorting all markets that disagree with his ludicrously socialist ideals does not a chancellor make.

So, how many of you lot with the torches and pitchforks have economics degrees and/or an in-depth understanding of the intricacies of a modern, global economy? :rolleyes: